Dismissing lawfully: what to do before the letter goes out

Dismissal is closely regulated, and getting the procedure wrong costs more than severance: it can mean additional damages for unfair dismissal, or an order to reinstate.

The point to grasp early is that the ground stated in the termination letter is the ground that binds in court. Another cannot be substituted later. A letter that is too brief, or states no ground at all, puts the employer behind before the case begins.

Conversely, employers with the paperwork in order — published work rules, warnings issued in sequence, contemporaneous performance records — rarely end up in court at all.

What must be in place before the day?

• Work rules published to staff, stating which conduct is treated as serious.
• Written warnings issued in sequence, with proof of receipt, unless the misconduct is serious enough to dispense with them.
• A contemporaneous record of the incident with dates and those involved — written at the time, not reconstructed when dismissal is decided.
• An opportunity for the employee to respond. Not required in every case, but it strengthens the employer's position considerably.

How should the termination letter be written?

• State the ground fully and specifically — not "failed probation" or "restructuring".
• State the effective date and the notice given. Immediate dismissal means pay in lieu on top.
• Itemise what will be paid: severance, outstanding wages, overtime and accrued leave.
• Put it in writing with proof of delivery. A verbal dismissal makes the ground very hard to prove later.

When is severance not payable?

Only in a few cases, and the ground must be stated at the time: dishonesty or an intentional criminal act against the employer, wilful damage, gross negligence causing serious loss, breach of lawful and fair work rules after a written warning, which is effective for one year from the date of the breach, three consecutive working days' absence without good cause, whether or not a holiday falls in between, and a final custodial sentence.

The last of those carries an exception employers routinely miss. Where the sentence was for an offence of negligence or a petty offence, severance remains payable, so the offence itself has to be checked before relying on this ground.

Poor performance, not fitting the team, restructuring, redundancy and closure are not on that list. Severance remains payable in those cases.

Can you dismiss because the business is losing money?

Reducing headcount for losses or restructuring is permitted, but severance is payable in full and the selection criteria should be explainable. Criteria that cannot be explained invite an unfair dismissal claim.

Where machinery or systems replace labour, the law imposes additional notice requirements and additional payments. Check before proceeding.

Does a mutual termination agreement actually end it?

A negotiated termination is often better than a unilateral dismissal: it ends the matter at once and the cost is known. But the documents have to be right, or the employee can still bring a claim afterwards.

Note that an agreement giving the employee less than the statutory minimum has no effect, even where the employee signed it.

This page is general information, not advice on your business. Bring the work rules and the related documents for review before acting.